UK graphics company Imagination Technologies is laying off 350 as it feels the iPhone pinch

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Smartphone sales are slowing down, and it looks like Apple might see its first iPhone sales decline in the next quarter. That pinch is now being felt by one of Apple’s key suppliers. UK company Imagination Technologies announced today that it is restructuring its company. It will lay off 350 people and shutter some operations in the process — 200 announced today, on top of 150 announced in February. Imagination licenses graphics and semiconductor IP to tech companies, counting both Apple and Intel as customers and shareholders (Apple currently holds an 8.4% stake, while it looks like Intel has just under 5%).

Imagination said that the workforce reductions and closures of some operations will be in what it considers non-core operations. They will not impact its three main businesses — graphics and multimedia (Imagination’s PowerVR business), processing (its MIPS processor business that it acquired in 2012) and connectivity (its Ensigma low-power communications IP business).

“This swift and decisive action will put us back on a sound financial footing and will enable us to have the necessary resources to further strengthen our three core businesses,” said Andrew Heath, the company’s interim CEO. “They are unaffected by these cuts.”

It’s not clear where some of Imagination’s newer initiatives will be left in the wake of this news. The company launched a Kickstarter for a new IoT dev kit in November 2015 partly to test the market waters for such a product. In February — before Imagination began to announce its restructuring news — the company updated Kickstarter supporters that it was in China for tooling and QA testing.

The statement to the market today noted that Imagination’s System on a Chip (SoC) design business “will be refocused and rescaled.” Imagination did not spell out exactly what other areas are being affected, but other businesses include the company’s Flow cloud connectivity and VoIP products, as well as its CaskeiD audio distribution tech.

The company — which has seen declines in revenues and a widening operating loss, according to its last earnings report from December — says it wants to cut operating costs by £15 million ($22 million) in the next financial year, which ends April 2017, implementing cost reductions in the current FY (ending April 2016).

Group revenues in the first half of the current fiscal year were £71.1 million, with £62.7 million of that covered by royalty and licensing payments for its technology. Its adjusted operating loss was £7.3 million for the period, compared to a profit of £5.0 million the year before.

Imagination had previously flagged its financial situation and had said it would seek to sell Pure, its consumer electronics division that makes devices like digital radios, and it also reiterated that plan again today, saying that it has received “considerable interest” in the unit. Pure itself is estimated to be worth £15 million, on top of the other cost cuts that Imagination is aiming to make.

Imagination said it “continues to have sufficient cash resources to meet its obligations going forward.” The company’s shares today are trading up 8.5%, giving it a market cap of $737 million.

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Crunchbase

OverviewImagination Technologies creates and licences semiconductor System-on-Chip Intellectual Property (SoC IP). The company also devotes resources to the development and manufacturing of DAB digital radios.
Imagination has a highly skilled workforce of over 1,200 people, of which around 80% are qualified engineers. Their headquarters are in Kings Langley, Hertfordshire.
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